Nonprofit DMCC Providing Low Cost Student Loan Help

Debt Management Credit Counseling Corp (, a nonprofit credit counseling organization (DMCC), launches a simple to use online calculator to help borrowers quickly calculate federal student loan repayment options at no charge. The launch comes with a caution for students in debt trouble to be wary of profiteering debt relief companies charging high fees and urges borrows to seek low cost student loan help through nonprofit consumer credit counseling.

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Report Says Debt Settlement Companies May Leave Clients Worse Off

Using a settlement company to help you dig out from underneath burdensome debt may sound appealing, but it may leave you worse off than when you started, according to new research.

A report from the Center for Responsible Lending, a nonprofit research group, finds that consumers who sign on with for-profit debt settlement companies find their debts grow about 20 percent on average before a settlement, with no guarantee that such a settlement will be reached.

“Our concern is that this is another way of taking advantage of people who are in dire straits to begin with,” said Ellen Harnick, senior policy counsel at the center and co-author of the report.

Debt settlement companies offer to substantially reduce the amount owed by negotiating with credit card companies and other creditors. But to use a settlement company’s services, a client generally must stop making payments on the debt. Instead, money is deposited in a dedicated account; the funds are used to pay creditors, and the settlement company, if and when a settlement is reached. (The fee is often a percentage of the debt, or a percentage of the amount saved by the settlement.) However, defaulting on a debt means additional interest and late fees accrue on the account. Some card companies will not deal with settlement companies, and may file a lawsuit when payments stop.

The higher balance, plus the debt settlement fees and potential taxes owed on amounts that are forgiven, can substantially whittle down any savings realized if a settlement is eventually reached, the report finds. Consumers must settle at least two-thirds of their debt to benefit from debt settlement, but many are unable to get that result, the report said. The average debt-settlement customer has six debts totaling $30,000.

Typically, consumers consider debt settlement as an alternative to filing for personal bankruptcy. But Edward C. Boltz, a bankruptcy lawyer in Durham, N.C., says he sees clients who have ended up seeking bankruptcy protection despite having gone through debt settlement. Settlement companies usually will negotiate credit card debt, but often may not include medical or tax debt in their services. So clients who have a broad mix of debt may not get the relief they need, Mr. Boltz said.

It is also difficult to determine the likelihood of success in obtaining a settlement. The new report cites research from the federal Government Accountability Office, which noted that the percentage of clients successfully completing a debt settlement program was in the “single digits.”

Federal rules that took effect in 2010 bar debt settlement companies from charging fees upfront; they may collect a fee only after a settlement is reached and a payment is made under the agreed-upon plan.

The report notes that the American Fair Credit Council, a trade group representing debt settlement companies, has said that success rates had improved since the new rules took effect. A council representative did not respond to a phone call seeking comment.

Data from Colorado, however, which regulates debt settlement companies that operate in the state, suggests any change in success rates since the upfront-fee rule took effect is “marginal,” the report said.

Here are some questions about debt settlement:

■ Will using a debt settlement company affect my credit score?

Yes, according to the Consumer Financial Protection Bureau. When you stop paying your debts and your accounts become delinquent, that information is reported to the major credit rating agencies and can harm your credit score. The delinquency may remain on your credit report for seven years.

■ Is debt settlement the same as a debt management plan offered by credit counseling companies?

Credit counseling agencies — which are often nonprofit organizations partly funded by credit card companies — obtain upfront agreements with creditors that allow a debt to be paid off over three to five years. Typically, the creditor agrees to a lower interest rate and waives penalty fees, but does not eliminate any of the principal owed. This option still requires that significant monthly payments be made, however, so not everyone may qualify. The Justice Department maintains a list of credit counseling agencies that are approved to provide pre-bankruptcy counseling on its website.

■ Are there any other options if I can’t pay my debt?

The Center for Responsible Lending suggests that you try to talk with your creditors yourself, especially if you have not become delinquent yet. Some companies have programs to reduce your principal or lower your interest rate if you can document a hardship, like losing a job.

If you cannot see any way to pay your debts, you may file for personal bankruptcy protection — a serious step that discharges your debt but impairs your credit rating and your ability to borrow for seven to 10 years, depending on the type of filing.

To view this article at The New York Times click  HERE

Facing Foreclosure?

Scammers are targeting people having trouble paying their mortgages. Some claim to be able to “rescue” homeowners from foreclosures, while others promise to modify your loan – for a fee. The Federal Trade Commission, the nation’s consumer protection agency, wants you to know how to avoid scams that could make your housing situation go from bad to worse. Signs of a Foreclosure Rescue Scam If you are in danger of foreclosure, AVOID any individual or company that:

Requires a fee in advance

Don’t pay any business, organization, or person who promises to prevent foreclosure or guarantees you a new mortgage. So-called “foreclosure rescue companies” claim they can help save your home, but they can’t really do that. They’re just out to make a fast buck. Some may ask for hefty fees in advance – and then, once you pay, stop returning your calls. Others may string you along before disclosing their charges. Cut off all dealings if someone insists on a fee in advance.

Promises to find mistakes in your loan documents that will force your lender to cancel or modify your loan

Cancelling your loan won’t allow you to stay in your home, and in most cases, lenders are not required to modify your loan to make it more affordable simply because of mistakes in your loan documents.

Guarantees to stop a foreclosure

Don’t do business with anyone who offers an “easy out” of foreclosure. These kinds of claims are the tell-tale signs of a foreclosure rip-off:

“We can stop your foreclosure!” “97% success rate!” “Guaranteed to save your home!”


Advises you to stop paying your mortgage company or stop talking to your mortgage company

Some scammers offer to handle financial arrangements for you, and then pocket your payment instead of sending it to your mortgage company. Send your mortgage payments ONLY to your mortgage company. Scammers may advise you not to communicate with your mortgage company. That’s a bad idea because you may not find out until it’s too late that the scammer has done nothing for you, that your mortgage company was willing to modify your loan, or even that foreclosure is just days away!

Help is Available

Contact your mortgage company as soon as possible if you’re having trouble paying your mortgage or if you get a foreclosure notice. Keeping the lines of communication with your mortgage company open is critical. Call 1-888-995-HOPE for free personalized advice from housing counseling agencies certified by the U.S. Department of Housing and Urban Development (HUD). This national hotline – open 24/7 – is operated by the Homeownership Preservation Foundation, a nonprofit member of the HOPE NOW Alliance of mortgage industry members and HUD-certified counseling agencies. For free guidance online, visit And for free information about the President’s plan to help financially strapped homeowners in mortgage misery, visit   DMCC is a 501 (c)3 nonprofit organization committed to educating consumers on financial issues and providing personal assistance to consumers who have become overextended with debt.  Education is provided free of charge to consumers, as well as personal counseling to identify the best options for the repayment of their debt. To speak to a certified credit counselor, call toll-free 866-618-3328 or email

Ref: Federal Trade Commission Public information